Winners And Losers Of Q3: Applied Industrial (NYSE:AIT) Vs The Rest Of The Engineered Components and Systems Stocks

December 03, 2024 at 03:07 AM EST

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The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how engineered components and systems stocks fared in Q3, starting with Applied Industrial (NYSE: AIT).

Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

The 13 engineered components and systems stocks we track reported a slower Q3. As a group, revenues missed analysts’ consensus estimates by 2% while next quarter’s revenue guidance was 1.9% below.

Thankfully, share prices of the companies have been resilient as they are up 8% on average since the latest earnings results.

Applied Industrial (NYSE: AIT)

Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE: AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.

Applied Industrial reported revenues of $1.10 billion, flat year on year. This print exceeded analysts’ expectations by 1.5%. Despite the top-line beat, it was still a mixed quarter for the company with a narrow beat of analysts’ organic revenue estimates but a miss of analysts’ adjusted operating income estimates.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “I’m encouraged by the start to fiscal 2025. While the demand backdrop remains mixed, first-quarter sales exceeded our expectations and strengthened during September. Positive trends are developing across our Engineered Solutions segment including stronger orders within our Automation operations and the technology sector, while Service Center segment sales held steady as the quarter progressed.”

Interestingly, the stock is up 25.8% since reporting and currently trades at $281.58.

Is now the time to buy Applied Industrial? Access our full analysis of the earnings results here, it’s free.

Best Q3: Graham Corporation (NYSE: GHM)

Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.

Graham Corporation reported revenues of $53.56 million, up 18.8% year on year, outperforming analysts’ expectations by 7.8%. The business had an exceptional quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.

Graham Corporation delivered the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 34.8% since reporting. It currently trades at $44.84.

Is now the time to buy Graham Corporation? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: Worthington (NYSE: WOR)

Founded by a steel salesman, Worthington (NYSE: WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.

Worthington reported revenues of $257.3 million, down 17.5% year on year, falling short of analysts’ expectations by 13.1%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.

Worthington delivered the slowest revenue growth in the group. As expected, the stock is down 7.5% since the results and currently trades at $41.86.

Read our full analysis of Worthington’s results here.

Gates Industrial Corporation (NYSE: GTES)

Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE: GTES) offers power transmission and fluid transfer equipment for various industries.

Gates Industrial Corporation reported revenues of $830.7 million, down 4.8% year on year. This print was in line with analysts’ expectations. Zooming out, it was a satisfactory quarter as it also logged an impressive beat of analysts’ EBITDA estimates but organic revenue in line with analysts’ estimates.

The stock is up 24.1% since reporting and currently trades at $22.68.

Read our full, actionable report on Gates Industrial Corporation here, it’s free.

Enpro (NYSE: NPO)

Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE: NPO) designs, manufactures, and sells products used for machinery in various industries.

Enpro reported revenues of $260.9 million, up 4.1% year on year. This result lagged analysts' expectations by 1.3%. Overall, it was a disappointing quarter as it also logged full-year EBITDA guidance missing analysts’ expectations.

The stock is up 32.4% since reporting and currently trades at $193.94.

Read our full, actionable report on Enpro here, it’s free.

Market Update

Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September, a quarter in November) have kept 2024 stock markets frothy, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there's still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.

Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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